Globe readers, take a bow. Through stubborn inflation, high interest rates and on-again, off-again recession concerns, the stock picks submitted to our inaugural Investing Club Challenge delivered market-beating gains by the finale.
They also demolished our own efforts at assembling a winning collection of stocks.
A little over a year ago, we asked for as many as three stock picks from any reader who wanted to participate in the challenge. We received several hundred submissions, then assembled a portfolio based on the 12 most frequently cited picks.
These stocks were held for a full year in something we called the Readers’ Portfolio.
Flimsy penny stocks didn’t make the cut because there was little consensus here. Instead, readers focused on bigger game, drawing on energy infrastructure, Canadian banks, a telecommunications stalwart, a global convenience store empire and a complex investment manager.
They recognized the enduring appeal of e-commerce and the momentum of artificial intelligence. And they wagered on the resurgence of green energy.
Dividends mattered. But so did growth and diversification.
At the end of the full year, March 13, it was impossible to argue with the results: The Readers’ Portfolio delivered a total return of 44.3 per cent.
It beat the total return of the Standard & Poor’s 500 Index (in Canadian-dollar terms, including dividends) by 10.8 percentage points. It beat the S&P/TSX Composite Index by 28.3 percentage points. And it beat our own stock picks, which we called the Globe Hot List, by – oh no – 34.3 percentage points.
Sure, the Readers’ Portfolio had its laggards. But only three stocks ended the one-year period with a loss, and none was serious enough to exert a major drag on the portfolio’s overall performance.
What’s more important is that winning stocks won big. Nvidia Corp. NVDA-Q, Shopify Inc. SHOP-T and Microsoft Corp. MSFT-Q returned an average of 145 per cent over the course of the competition, providing a tech-powered engine that rarely sputtered.
The success of the Readers’ Portfolio is nothing short of astounding. It’s one thing for a professional stock picker to beat a major index in a given year. It’s another thing entirely to achieve this feat with consensus choices from hundreds of stock pickers and a portfolio that can’t be altered.
The stock selections made in March, 2023, had to withstand change.
At the start of the challenge, the U.S. Federal Reserve and the Bank of Canada were still raising their key interest rates in a battle to tame troubling inflation. Bond yields soared to multiyear highs by October, weighing on stock valuations and dividend payers in the second half of 2023.
Many economists were convinced that a recession was brewing – or not. And the whole AI thing looked like a bubble that could pop before the competition wrapped.
That a dozen stocks, picked essentially by popular vote, could persevere though these uncertainties and beat the performance of major indexes is a testament to the investing smarts of our readers.
Can Globe readers do it again? More on that later.
Apart from creating and celebrating the success of the Readers’ Portfolio, The Globe’s Investing Club Challenge was also designed to recognize the individual talents of our readers.
Amazingly, 32 stock pickers – about 5.5 per cent of submissions – saw their holdings more than double over the past year.
Tim Blackwell, a systems specialist at the Smith School of Business at Queen’s University, is the standout in this elite group. His three selections delivered an average gain of 394 per cent.
Two stocks – Perion Network and TC Energy – weren’t rockets, but Super Micro Computer Inc. (SMCI) certainly was. The Nasdaq-listed tech company, which uses Nvidia’s AI chips in its servers and is now valued at more than US$50-billion, delivered a gain of 1,231 per cent over the 12 months of the challenge, in Canadian-dollar terms.
“I work at Queen’s University and get to attend many different finance and accounting classes. Most profs I talk to don’t recommend picking stocks, but uncovering these gems can be rewarding in many ways,” Mr. Blackwell said in an e-mail.
He was the only participant to invest in SMCI, compared with 25 participants who chose Nvidia. He invested in Nvidia in 2018 and learned how the chips sector permeates many other industries. A free stock screener in 2022 revealed that SMCI – a stock that may have flown under the radar for many investors even a year ago – appeared undervalued at the height of the semiconductor shortage.
And get this: The stock peaked on March 13, 2024, the last day of the investing challenge. It has since declined 26 per cent. As market timing goes, that’s a perfect finish.
Interested in taking part in The Globe’s Investing Club? For our second year running, go head-to-head with the ROB team with your stock selections, and track them over the course of a year. Coming soon for 2024 – sign up here to get notified when we launch.
David Berman